Professor Stijn Van Nieuwerburgh is the Earle W. Kazis and Benjamin Schore Professor of Real Estate and Professor of Finance at Columbia Business School. Before joining the CBS faculty in 2018, he was on the faculty of New York University’s Stern School of Business for fifteen years. He received his B.A. from the University of Ghent and his M.A., M.S., and Ph.D. from Stanford University.
Professor Van Nieuwerburgh’s research lies in the intersection of real estate, asset pricing, and macroeconomics. He received the Germán Bernácer Prize in 2015 for his research on the transmission of shocks in the housing market on the macroeconomy and the prices of financial assets. He studies the impact of remote work on real estate valuations, affordable housing policies, the impact of foreign buyers on the housing market, mortgage market design, regional house price inequality, and mortgage choice. Another recent strand of his research focuses on government debt and fiscal policy.
Professor Van Nieuwerburgh has published over 50 journal articles and was Editor at the Review of Financial Studies. He is a Faculty Research Associate at the National Bureau of Economic Research, the Center for European Policy Research, and the Asian Bureau of Finance and Economics Research. He has served as an advisor to the Norwegian Minister of Finance and has been a visiting scholar at the Central Bank of Belgium, the New York and Minneapolis Federal Reserve Banks, the Swedish House of Finance, the International Center for Housing Risk, and has contributed to the World Economic Forum project on real estate price dynamics. He is on the Board of Directors of Moody’s Ratings and a member of the Advisory Board of Anchor Healthcare Properties.
Professor Van Nieuwerburgh teaches Real Estate Finance and Real Estate Analytics at Columbia Business School. He also teaches a Ph.D. course on Empirical Asset Pricing.
Over the past two years, Professor Van Nieuwerburgh has received substantial media attention for his research into the impact of hybrid work on office buildings. In February 2023, the New York Times profiled him as “the prophet of urban doom” and in January 2024, Professor Van Nieuwerburgh was featured on a CBS News ‘60 Minutes’ segment discussing the challenges facing office buildings and the cities that contain them.
Since the onset of COVID-19, office vacancies have climbed to nearly 40-year highs as workers have adjusted to hybrid working environments. According to Professor Van Nieuwerburgh, some estimates suggest that office building values have fallen by 40% or more. That fall in value translates to a loss of nearly $600 billion, but the loss might not yet be fully apparent.
“The pricing of an office building is only visible when a particular building sells, and with the recent challenges facing office buildings, there has been a significant slowdown in the number of office properties selling,” Professor Van Nieuwerburgh said. “The true decline in the value of office buildings will not fully materialize until we see more sales or foreclosures.”
Professor Van Nieuwerburgh highlighted how more challenges may lie ahead with office buildings, as tenants are typically signed to five to ten years of long-term leases. As more leases expire, and so long as hybrid work remains a fixture of working patterns, tenants may decide to shrink their office footprints upon lease renewal, putting more downward pressure on office prices. Fewer new leases are currently being signed, and those that are being signed are often for significantly smaller spaces.
“The decline in office demand is a train wreck in slow motion, and we are only in the fourth or fifth inning. There are still a lot of office tenants that are asking themselves, ‘Do I want to renew this space? Do I want to vacate? Maybe I only need half as much space.’ Tenants will keep making these decisions for the next several years as they recalibrate their needs in the post-pandemic hybrid work environment,” said Professor Van Nieuwerburgh.
One of the first to research the impact of hybrid work on office buildings, Professor Van Nieuwerburgh, released a paper on the challenges facing office buildings in June 2022, shortly after the longer-term effects on real estate of the Covid-19 pandemic and the prevalence of remote work began to take effect. Professor Van Nieuwerburgh commented that he saw the potential impact on real estate of COVID-19 and hybrid work early and began researching its long-term effect shortly after the onset of the pandemic.
“As people began adjusting to hybrid work in the middle of 2020, I quickly realized that hybrid work would have a dramatic effect on office buildings. Even today, average office occupancy is only around 50% of pre-Covid levels.” Professor Van Nieuwerburgh said. “Coming out of the Great Recession, I wrote extensively on the impact of lowered mortgage lending standards and how it influenced the broader economy, but most of that research was looking at what had happened in the past. With the impact of hybrid work, I saw this research as an opportunity to look ahead and write about what was coming.”
In November 2023, Professor Van Nieuwerburgh published an additional article on office buildings. His paper, “Converting Brown Office to Green Apartments,” explored the possibilities of converting outdated office buildings with high vacancies into modern green apartment buildings. The paper went beyond his initial analysis of the impact of hybrid work on office buildings to evaluate the viability of converting struggling office buildings into new green apartment buildings. In the paper, he sought to calculate the amount of office square footage that could reasonably be converted, thereby reducing excess supply. In addition to decreasing the oversupply of office space, conversions of older office buildings could also reduce the future greenhouse gas emissions of these aging buildings.
“Here we have an opportunity to potentially address three of the built environment’s most pressing issues: the presence of some older office buildings that are not likely to remain financially viable, the dire need for housing amidst the worst affordability crisis in a generation, and the need to invest in green infrastructure to address the climate crisis.”
Office vacancies are often concentrated. A local office market may have an average vacancy rate of 20%, but due to their age, location, and building characteristics, 10% of buildings may have 60% of all vacancies. These buildings would need tremendous investment to stay competitive with newer office buildings. Converting these buildings into residential apartments may be a financially viable way forward.
“I look at the Netherlands where they have in fact successfully produced more than 100,000 housing units over the last ten years through office to residential conversions,” Professor Van Nieuwerburgh said. “For a small country like the Netherlands, that represents a significant percentage of their total housing construction – 10% of all housing construction.”
Professor Van Nieuwerburgh has continued to explore this topic. In December, he gathered twenty-nine individuals from the fields of government, urban planning, real estate, finance, architecture, and the arts to engage in an open discussion about the future of real estate in New York City. The symposium, held at CBS in partnership with The Hub, resulted in a working paper that presents new strategies for making more office-to-residential conversions viable.
“I am a believer that in selected instances offices can be converted to apartments, but office conversions face three broad challenges, namely, is the building physically suitable for conversion, is the conversion permissible under regulatory environment, and is the conversion financially viable,” said Professor Van Nieuwerburgh. “About 10% of the office stock in the United States is in our view physically suitable. In New York City, that number is closer to 30%. The regulatory or zoning piece is complex, but many policymakers nationwide are thinking about it. Finally, the economics component is a cautious yes, but only when the office property can be purchased at a low enough value.”
Many elected officials are paying close attention to the performance of office buildings due to the impact of commercial real estate on fiscal budgets. According to Professor Van Nieuwerburgh, property tax revenues comprise between 20% and 60% of state and local revenue collections nationwide. In New York City alone, property tax revenues account for approximately 47% of all tax revenues, with office buildings and retail buildings accounting for 31% of all property tax revenue. Any change in office building values could have multi-billion-dollar effects on municipal budgets, such as New York’s, which relies on property tax revenue from office buildings.
“In the long run, property taxes on those buildings may fall by 40% as property values fall. That in turn means less money for public safety, sanitation, schools, parks, and all the other services a city provides,” said Professor Van Nieuwerburgh. “Left unaddressed, some people are going to decide that the quality of life in the city has deteriorated, that they do not get the same services for their taxes, and that they want to move out. This cycle can continue in something that we have called an ‘urban doom loop.”
Spillover effects from the decline in office building values are not limited to state and local governments. Another source of distress that Professor Van Nieuwerburgh has identified is the commercial banking sector. Commercial real estate lending plays a massive role in the business of small to medium-sized banks, particularly regional banks. These banks have significant exposure to commercial real estate. According to Professor Van Nieuwerburgh, all banks own about half of the $6 trillion in commercial real estate debt in the United States, with smaller and regional banks owning about 70% of that half.
These smaller and regional commercial banks could face significant losses if office building values continue to fall. Given that a typical mortgage leverage ratio is between 55% and 65%, some lenders may lose some of their investment if office values go down by 40% or more. However, while a lender could seize the property in a foreclosure, sales of foreclosed properties often result in distressed prices, and a lender might realize an even more significant loss. With limited ability for current office owners to refinance or sell, lenders need help with their loans on struggling office buildings. These challenges could impact broader liquidity levels across the economy.
“These same small banks are making loans to small businesses in their communities. So now that these small banks have to take losses on their commercial real estate portfolio, they will be less likely to make a small business loan, or they will charge a lot more for a small business loan, so credit conditions tighten,” said Professor Van Nieuwerburgh.
Many of these same banks do not have to adjust the value of their commercial real estate loans so long as they are ‘held to maturity’ from an accounting standpoint. Because of this accounting practice, many smaller and regional commercial banks may be undercapitalized due to their bad real estate loans and may be more vulnerable to financial distress.
“I think that the most likely scenario is one of a slow burn, a train wreck in slow motion, where banks will have to provision and take losses for several years as they work through their bad real estate loan portfolios,” Professor Van Nieuwerburgh said. “There will likely be some consolidation among some of the weaker banks, and some might need to get resolved by the FDIC. But even in the best-case scenario, we are likely to face at least a modest credit crunch that will hit the real estate sector first and foremost.”
Professor Van Nieuwerburgh sees the current environment for cities and real estate as a transition period. While this transition presents challenges, it also presents opportunities to reimagine what the city will be.
“Cities have always gone through transitions. I like to think of this period as similar to the period where we had de-industrialization in cities,” Professor Van Nieuwerburgh said. “If you walked in Manhattan one hundred years ago, you would have seen a lot of pollution, steamboats, manufacturing, warehouses. None of that stuff exists anymore. We have cleaned up the waterfront, there are no more ships docking. We have gone through a dramatic transformation of New York City real estate. Ironically, it was the service sector and office buildings that bailed us out then. We need to similarly reimagine the future of our large cities now that excess office space has become the problem.”
According to Professor Van Nieuwerburgh, in the city of the future, we will capitalize on the attractive amenities that draw people to places such as New York City and refashion our cities to be more oriented toward consumers.
“In a nutshell, we have too much office, and too little housing. You could also add in other uses such as childcare space or educational space, but simply put, we need to repurpose some of our real estate stock,” said Professor Van Nieuwerburgh. “I like to think of the city of the future as less of a place of production and more of a place of consumption.”
Despite the challenges facing office buildings, municipal budgets, and commercial banks, Professor Van Nieuwerburgh remains cautiously optimistic about the ability of government and business to solve the pressing challenges facing cities today.
“New York City has recovered from other large shocks, such as the Great Recession, September 11th, the Savings and Loan crisis, the population losses of the 1960’s through the 1980s, among others. Each time New York City recovered and emerged stronger,” said Professor Van Nieuwerburgh. “While it may take time for policymakers to find the right solutions, in time, we will find new ways to get New York City back on track.”
Chris Byrns ’25 is a first-year MBA student focusing on Real Estate at Columbia Business School. A member of the school’s Real Estate Association, he is the club’s Assistant Vice President of Careers. He graduated from Cornell University with a B.A. in History and from the Columbia University Graduate School of Architecture, Planning, and Preservation with a M.S. in Real Estate Development. He previously worked as an Associate Director in real estate acquisitions for a global asset manager and in real estate debt and equity brokerage. He plans to pursue a career in real estate in New York City after graduation.